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Cost Stickiness in Brazilian Firms

Author

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  • Otavio Ribeiro De Medeiros

    (Universidade de Brasilia, Brazil)

  • Patricia de Souza Costa

    (Universidade de Brasilia, Brazil)

Abstract

Conventional cost accounting assumes that the relation between cost and volume is symmetric for volume increases and decreases. We test an alternative model where costs increase more when activity rises than they decrease when activity falls by an equivalent amount. We find, for a sample of Brazilian firms that selling, general, and administrative costs increase 0.59% per 1% increase in sales but decrease only 0.32% per 1% decrease in sales. We test several hypotheses about the properties of sticky costs and how the stickiness of SG&A costs changes with firm circumstances and we confirm cost stickiness for Brazilian firms.

Suggested Citation

  • Otavio Ribeiro De Medeiros & Patricia de Souza Costa, 2004. "Cost Stickiness in Brazilian Firms," Finance 0412021, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0412021
    Note: Type of Document - pdf; pages: 14
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0412/0412021.pdf
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    References listed on IDEAS

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    1. Noreen, Eric & Noreen, Eric & Soderstrom, Naomi, 1994. "Are overhead costs strictly proportional to activity? : Evidence from hospital departments," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 255-278, January.
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    Cited by:

    1. Cordova León, José Fernando & Duque Espinoza, Gabriela Monserrath & Argüello, Carolina Denisse Álvarez, 2018. "Comportamiento asimétrico de los costos en el sector de la construcción del Ecuador," Revista Tendencias, Universidad de Narino, vol. 19(2), pages 74-91, July.
    2. NASSIRZADEH Farzaneh & SAEI Mohammad Javad & SALEHI Mahdi & BAYEGI Sayyed Ali Haddad, 2013. "A Study Of The Stickiness Of Cost Of Goods Sold And Operating Costs To Changes In Sales Level In Iran," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 8(2), pages 79-89, August.
    3. Hakan Özkaya, 2021. "Sticky cost behavior: evidence from small and medium sized enterprises in Turkey," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 349-369, June.

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    More about this item

    Keywords

    cost accounting; sticky costs; Brazilian firms;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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